Shore duty: Mortgage lender taking big steps to pump up its volume

From left, David Hall will create Shore Financial's Internet mortgage business and is president of its retail mortgage
division, Mat Ishbia is president of the wholesale mortgage division — expected to drive company growth — and Kip Kirkpatrick is the new CEO, a veteran private-equity manager charged with quadrupling Shore's loan volume.

Don't be surprised if they use lots of sports metaphors

Kip Kirkpatrick is assembling a team at Shore Financial Services Inc. that has a lot of experience with teams.

Kirkpatrick, the new CEO, was a four-year varsity basketball player at Northwestern University in 1990-94, was a three-year starter and is still ranked in the top 10 in career assists.

Mat Ishbia, a son of Jeff Ishbia, the company's founder, was an undersized guard at Michigan State University from 2000-02, listed at 5 feet 10 (but likely shorter) who made the team as a walk-on and was popular with fans.

He played in 48 games, averaging 0.6 points, 0.3 rebounds and 0.3 assists, but was respected enough by coach Tom Izzo that he was kept around for a year as a volunteer assistant after his eligibility expired.

David Hall, president of Shore Mortgage, the firm's retail arm, was a varsity golfer at the University of Michigan from 1989-93 and was the state's top amateur player in 1995. He is a two-time club champion at the Detroit Golf Club and still a scratch golfer.

Tom Henderson

Shore Financial Services Inc. of Birmingham has taken dead aim at Quicken Loans Inc. as part of its ambitious plan to sharply grow loan volumes over the next few years -- from about $1.8 billion this year to $8 billion to $10 billion in three years.

Last year, Detroit-based Quicken did about $30 billion in originations, and Troy-based Flagstar Bank did $26.6 billion in originations.

To guide the growth, Shore founder Jeff Ishbia recruited Kip Kirkpatrick, something of a private-equity star in Chicago, to replace him as CEO. It was a process that began last year with one of Ishbia's sons, Justin, a friend of Kirkpatrick's in Chicago.

"Justin said, "Dad's got this great business, and he thinks it could be really big,' " recounted Kirkpatrick. He met with Jeff Ishbia, was impressed with the business -- the company had stuck to conforming loans and avoided the subprime and liar-loan messes that hit much of the mortgage industry -- and joined the company in April.

Shore was already growing through acquisitions, adding a big brand name in the local mortgage industry to its operations last October: Harry Glanz and his Southfield-based company, Capital Mortgage

Funding. Kirkpatrick added another brand name in May: David Hall, the former voice and face of Quicken Loans through that company's ubiquitous radio and TV ads.

Glanz is manager of Shore's Capital Mortgage division. He reports to Hall, who is president of Shore Financial's retail arm, Shore Mortgage. Hall also runs the Hall Financial division under the Shore Mortgage umbrella.

Glanz said Jeff Ishbia first talked to him about an acquisition early in 2010; it closed last fall.

"When he showed us their backroom, their technology and what they were doing in wholesale, it made sense to hitch our wagon to theirs," said Glanz, referring to his co-founder at Capital, Dan Burke.

"They were bigger and stronger. They had access to more wholesale lines of credit, they were about 10 years ahead of us in technology. It was an opportunity for us to grow our business in a shrinking industry," said Glanz, whose company originated about $300 million in loans last year. "And it's turned out to be a very good thing for us."

A basketball player at Northwestern University in 1990-94 (see story, Page 11) and a believer in building teams, Kirkpatrick acknowledges such sharp growth will be anything but easy. Differentiation and recruitment are two big challenges; the first thing Kirkpatrick has to do to build the company is build his team.

In addition to Hall, in May he hired Michael Jones, a former senior vice president of finance for Lehman Brothers global mortgage operations, and this month hired Susan Pelot, former regulatory compliance officer at Quicken, as Shore's chief compliance officer.

Kirkpatrick also added a former professor at Northwestern, Bob Duncan, to Shore's advisory board. A provost at Northwestern in 1987-91, he was chair of the Department of Management and Organizations at Northwestern's Kellogg School of Management, and from 2002-08 was dean of the Eli Broad

College of Business at Michigan State University.

"I met Kip as an undergraduate, and he was very impressive from the beginning," said Duncan. "We've kept in touch. We talked about this opportunity at Shore. He said he was going into this successful

organization that had a real opportunity to grow and "would you help me?' My background is all about organizations and leadership change, and I'm looking forward to it.

"Jeff (Ishbia)'s one of the best examples out there in any industry of a successful creator of a business who was insightful: He needed to bring in a leader to take the business to the next level."

Kirkpatrick plans to hit his growth target by acquisitions, by increasing the national network of independent brokers who fund their mortgage underwriting through Shore Financial's wholesale arm, United Wholesale

Mortgage, and by establishing a much stronger Internet presence. United expects to be licensed to underwrite mortgages in New York soon, which will extend its reach throughout the continental U.S.

Mat Ishbia, Jeff's son, is president of United Wholesale.

Hall's No. 1 marching order, said Kirkpatrick, is to quickly build up Shore's Internet presence, which is minimal today, basically just a website with a phone number and no real ability to process loans online. Quicken -- which declined to comment for this story -- has long been a dominant Internet lender, and Hall was part of the executive team behind its online growth.

"We've got a lot of ideas about how to build a national Internet presence, but we're just starting to build it," Hall said. "Over the last couple of years, the wholesale operation has been the driver. Now, getting retail going is the big challenge.

The key to hitting the growth figures involves figuring out how to build the United brand without losing the equity built in the Shore brand, Kirkpatrick said.

Overall, he will rely more on the growth of the wholesale side than the retail side -- which will require a different marketing strategy than Quicken employed in its growth. United Mortgage won't need to reach millions of individual borrowers that way, but the hundreds or thousands of independent mortgage brokers around the country who in turn reach million of would-be homeowners.

Kirkpatrick said it hasn't been decided yet if Shore will use Hall in any marketing campaigns.

Hall was the subject of a high-profile firing by Quicken founder Dan Gilbert in December 2007 for reasons never explained.

As part of his financial settlement after leaving Quicken, Hall had a noncompete clause. When it expired, he launched Hall Financial as a doing-business-as unit of Ross Mortgage Corp. of Royal Oak.

"Dave worked for me before he went to Shore," said Ross president Tim Ross. "I knew him through Quicken's advertising, of course, but I only got to know him personally after he went to work for me, and I really like him. He's a very sharp businessman. We had a good relationship and we parted on good terms.

"It was a better fit for him at Shore. Ross is very traditional. At Shore, they want to mimic what Quicken did, and Dave's perfect for that. An Internet business wouldn't have worked as well for us. It was a good move on his part," Ross said.

Ross, whose company does about $500 million in loan originations a year in four states, said he has met Kirkpatrick but doesn't know him.

"Like us, Shore is a nonbank mortgage banking firm, and I think that's going to be the preferred model. Whether it's Quicken or Shore or us, we'll carve market share out of the troubles the large-bank mortgage lenders are having."

Which was why Kirkpatrick was hired by Shore.

Kirkpatrick got his MBA through Northwestern's Kellogg School of Management in a program run in conjunction with First Chicago Equity Capital, the private-equity arm of the bank then known as First Chicago, later to become Bank One, then Chase.

In 2005, Kirkpatrick co-founded Chicago private-equity firm Water Street Healthcare Partners, which had a $370 million fund focusing on midsize health care companies. He negotiated a complicated deal in 2007 that got him named to that year's class of Crain's Chicago Business' 40 under 40.

That spring, Water Street bought the nation's third-largest chain of physical rehabilitation centers from Kalamazoo-based Stryker Corp. for $150 million, then merged the business with the No. 2 chain, all within 30 days.

Michael Beauregard, who co-founded Huron Capital Partners LLC in Detroit in 1999, worked with Kirkpatrick on several deals when he was in Chicago in the 1990s. First Chicago Equity Capital funded deals for Beauregard, first when he was head of acquisitions for Sunbeam Corp., then when he was an independent deal maker.

"I have no doubt Kip will be successful hitting those loan numbers," said Beauregard, who met Kirkpatrick when he was still in the MBA program at First Chicago.

"He was known as the modeling genius for First Chicago. ... His role was to burn through reams of information and identify what was relevant and to disregard what wasn't."

Eric McKinley is president and owner of Home Place Mortgage Loans

Inc. in Alexander City, Ala. He said he reluctantly began using United Wholesale as an underwriter of his firm's loans three years ago, after six months of persistence by United. But ever since, he has never had second thoughts. He said United gives him "unbelievable service" and is eager to close loans quickly.